TIDMELCO
RNS Number : 9972I
Elecosoft PLC
27 March 2018
27 March 2018
Elecosoft plc
("Elecosoft", the "Company" or the "Group")
Preliminary Results
For the Year Ended 31 December 2017
Elecosoft plc (AIM: ELCO), the construction software specialist,
is pleased to announce its audited results for the year ended 31
December 2017.
Financial Highlights
-- Revenue up 12% to GBP20.0m (2016: GBP17.8m) of which 49% was
from recurring maintenance and support revenue (2016: 48%)
-- Revenue up 8% at constant currencies (2016: 8%)
-- Reported operating profit up 48% to GBP2.4m (2016: GBP1.6m)
-- Adjusted operating profit* up 26% to GBP2.8m (2016: GBP2.2m)
-- Profit before tax up 50% to GBP2.3m (2016: GBP1.5m)
-- EBITDA up 50% to GBP3.6m (2016: GBP2.4m)
-- Software development spend up 6% to GBP2.7m (2016: GBP2.6m), representing 14% of revenue
-- 102% of adjusted operating profit converted into cashflow (2016: 70%)
-- Free cash flow up 117% to GBP2.6m (2016: GBP1.2m)
-- Net borrowings eliminated, GBP1.0m net cash at year end (2016: GBP1.3m net borrowings)
-- Reported basic earnings per share up 49% to 2.5p (2016: 1.7p)
-- Adjusted earnings per share* up 20% to 2.9p (2016: 2.4p)
-- Full year dividend up 50% to 0.60p (2016: 0.40p) with final recommended dividend of 0.40p
(* Adjusted profit measures exclude exceptional items and
amortisation of acquired intangible assets.)
Operational Highlights
-- Double award win at the Construction Computing Awards 2017
-- 15% of the top ENR 400 US construction contractors now using Powerproject(R)
-- Adoption of Bidcon(R) by IconSystem(R) customer McCarthy
& Stone, the UK's largest builder of retirement homes
-- Powerproject(R) SaaS released to UK market
-- Icon successfully integrated following acquisition in October 2016
-- Acquisition of new customers in Australia for Staircon(R) and Powerproject in Sweden
-- Increased level of SaaS recurring sales in our German ESIGN operation
-- Appointment of Jonathan Hunter as COO, and Simon Morgan as Group Finance Director
Executive Chairman, John Ketteley said:
"I am pleased to report that Elecosoft improved its performance
significantly in 2017 and has also made a strong start in 2018.
Although there is ongoing uncertainty, notably in relation to
Brexit, the fundamental drivers of our business remain. Elecosoft
is increasingly seen as a market-leading provider of construction
software and training, across the phases of a construction project
and beyond, in the on-going lifecycle of a building. We have a
strong balance sheet, industry-leading software and training, and
excellent customer relationships. Our unified branding and more
coordinated approach across the Group open up exciting prospects to
cross-sell our products as well as providing a stronger foundation
for building new customer relationships. I look forward with
confidence to the year ahead and beyond."
For further information, please contact:
Elecosoft plc Tel: +44 (0)20 7422 8000
JHB Ketteley, Executive Chairman
Jonathan Hunter, Chief Operating Officer
Simon Morgan, Group Finance Director
finnCap Ltd Tel: +44 (0)20 7220 0500
Adrian Hargrave / Kate Bannatyne (Corporate Finance)
Camille Gochez (Corporate Broking)
Redleaf Communications Tel: +44 (0)20 3757 6880
Elisabeth Cowell / Fiona Norman
About Elecosoft plc
Elecosoft is a specialist international provider of software and
related services to the Architectural, Engineering, Construction
and Owner/Operator (AECO) industries and digital marketing
industries from centres of excellence in the UK, Sweden, Germany
and the US. Elecosoft's market leading software solutions are
developed by teams in the United Kingdom, Sweden and Germany; and
its software solutions cover project management, construction site
management, estimating, timber engineering, 3D design and
visualisation, and cloud based digital marketing solutions.
Elecosoft is listed on the Alternative Investment Market in London
(AIM: ELCO).
Executive Chairman's Statement
"I am pleased to report that in 2017 Elecosoft improved its
performance significantly, eliminated its net borrowings,
strengthened its management team and made a strong start in the
first quarter of 2018."
Trading performance
Revenue
Elecosoft's total revenue for the year amounted to GBP20.0m
(2016: GBP17.8m), an increase of 12 per cent, of which recurring
maintenance revenue amounted to GBP9.9m (2016: GBP8.6m). Recurring
maintenance revenue as a proportion of total revenue for the year
marginally increased to 49 per cent (2016: 48 per cent).
Profit
Operating profit for the year was GBP2.4m (2016: GBP1.6m), an
increase of 48 per cent. Adjusted operating profit, which excludes
non-operating items and amortisation of acquired intangible assets,
was GBP2.8m (2016: GBP2.2m), an increase of 26 per cent.
Profit after tax for the year was GBP1.9m (2016: GBP1.2m) an
increase of 53 per cent; and basic earnings per share for the year
were 2.5 pence (2016: 1.7 pence), an increase of 49 per cent.
Adjusted earnings per share were 2.9 pence (2016: 2.4 pence), an
increase of 20 per cent.
Finance
Cash generated from operations amounted to GBP4.2m (2016:
GBP2.4m) and the strong conversion of operating profits into cash
during the year eliminated Group net borrowings by the half year
and produced a net cash position of GBP1.0m as at 31 December 2017
(2016: GBP1.3m net borrowings).
The net increase in cash and cash equivalents in the year under
review totalled GBP1.4m, which together with GBP2.8m of net current
assets (excluding deferred revenue), contributed to a further
strengthening of Elecosoft's financial position at the end of the
year.
Group net assets at 31 December 2017 totalled GBP11.5m (31
December 2016: GBP9.7m).
Software development
Elecosoft values its reputation for developing market leading
construction software. The technical and creative contribution of
Elecosoft's software development teams in the UK, Sweden and
Germany continue to be critical elements in Elecosoft's success in
developing an expanding portfolio of market leading software
programs.
Our development teams performed magnificently in the year to
satisfy the needs of our customers by responding to specific
requests to adjust or enhance our existing software programs. They
also liaise closely with our customers through user steering groups
to define key elements to be incorporated in new software programs
under development.
We very much value this close relationship with our customers
and I would like to take this opportunity on behalf of our software
development teams to thank our customers for their valuable,
constructive and practical feedback and involvement in our software
development process. We really do appreciate their input.
The Board adopted a policy some years ago of allocating a
significant portion of Group cash flow annually to finance the
development and enhancement of our software development programs
and the expansion of our software development teams. I am pleased
to say that this strategy has been effective and will continue.
Software development expenditure in the year under review
increased to GBP2.7m (2016: GBP2.6m) and expenditure on major
software development projects in Germany, Sweden and the UK which
was capitalised in the year totalled GBP1.1m (2016: GBP0.6m).
Our Group software development program increasingly involves the
development of SaaS web applications for existing software
programs, such as our project management and site management
offerings. I am pleased to say that the completed SaaS web
applications have so far been very well received.
Trading and marketing highlights
Our sales and marketing teams made outstanding contributions to
our growth in the year, evidenced by higher sales in all our
markets. The year also saw increased success in securing new
license sales together with higher revenue from our support and
training propositions.
Our marketing teams have made determined and successful efforts
to promote the Elecosoft(R) brand worldwide and I am confident that
it will play an increasing part in our progress as we move to
accelerate the impact of our latest cross-selling initiatives.
Our software programs are increasingly being used in combination
with each other, as our customers become more aware of the
significant improvement in performance that such combinations can
now deliver.
Elecosoft's software portfolio
We refer to Elecosoft as an international specialist
construction software group and I set out below a brief summary of
our current software portfolio. It consists of software programs
that on one hand have been designed and developed by our own
software development teams and on the other hand have become part
of our portfolio by acquisition. Our experience is that this is a
pragmatic and effective way of building our business and enhancing
the quality and scope of our construction software portfolio for
the benefit of our customers and our shareholders.
Project Management
We continued to develop our flagship Powerproject(R) software by
launching a SaaS proposition in the first half of the financial
year. We also saw increased adoption of our BIM and Site Progress
Mobile programs. For the fourth year running we celebrated
Powerproject winning the award for Best Project Planning Software
at the Construction Software Awards ("the Hammers"). We have sold
Powerproject to over 90% of the top 100 construction contractors in
the UK, and 35 out of the top 50 in Sweden, and I am pleased to say
that Powerproject now ranks third in sales of project scheduling
software to the US construction industry. Powerproject is now
available in ten languages, with another five currently being
translated.
Estimation
Bidcon(R), our estimation software, which was enhanced with two
releases in the year, continues to be the leading construction
estimation software program in Sweden. I am pleased to say that in
the UK Bidcon's BIM 3D quantity take-off feature became an
attractive proposition for McCarthy & Stone, which installed
Bidcon in the UK in the year.
Site Management
Our Swedish colleagues continued to enhance our Sitecon solution
during the year. In parallel intensive work was put into the
creation of the next generation SaaS-solution meeting international
demands on a collaboration software, to be launched in 2018. Our
Site Progress Mobile solution also gained increased market share
during the year now serving over 1,500 active users.
Visualisation
Interiormarket and Marketingmanager are leading visualisation
marketing programs sold to flooring and tiling companies and DIY
stores in Germany, and increasingly also worldwide.
3D CAD
Arcon maintained its market share in its core market of Germany
and increased its sales of complimentary third party
applications.
Data Management
IconSystem(R)'s blue chip retail customer base is testament to
the value delivered to them by its Specs and Standards and Property
Information Management software.
IconSystem's data management capability is also being
increasingly recognised by customers outside of the retail sector
and McCarthy & Stone has adopted IconSystem to improve the
coordination of its design, planning and construction
processes.
Engineering
Our portfolio of timber engineering applications delivered
growth in 2017. Demand increased in Australia for Staircon(R) with
the receipt of the largest Staircon order to date. As demand for
modular construction increases, our applications, including Statcon
and Framing, continue to serve the industry requirements in design
and off-site manufacturing.
The Elecosoft brand
The strength of Elecosoft's software portfolio was significantly
enhanced in 2016 by the launch of the Elecosoft brand for the
promotion of all our products. The response to the introduction of
Elecosoft was very positive, as evidenced by the significant
increase in our software sales to record levels in 2016 and
2017.
The unified brand not only signals a shift towards a more
collaborative culture within the business, but also provides a
sound platform for an increased focus on cross-selling
initiatives.
Elecosoft colleagues
The number of Elecosoft employees increased to a record 201 in
2017 (2016: 190). On behalf of the Board and shareholders, I wish
to thank all our highly skilled, and motivated people who are now
located as far afield as Sweden, the Netherlands, Germany, the
United States, Belgium and the UK, and to extend a warm welcome to
our colleagues who joined us during the year. We have an
outstanding, talented and balanced group of employees in all the
markets that we serve.
Board and management
I also take this opportunity formally to welcome the following
appointments to the Board during the year under review:
Jonathan Hunter was appointed Chief Operating Officer on 22
December 2017. In his previous role as Group Marketing and Business
Development Director, Jonathan was responsible for establishing
Elecosoft as a leading international software brand; and for
negotiating the acquisition of IconSystem.
Anders Karlsson was appointed as an Executive Director on 27
March 2017. Anders initially joined Consultec Byggprogram AB as
Managing Director in 2005 and then rejoined the Group in 2014 as
Managing Director of Consultec. In March 2017 he was appointed
Chief Executive Officer of the Company's wholly owned Swedish
subsidiary, Consultec Elecosoft AB.
Simon Morgan, FCA was appointed Group Finance Director on 15
November 2017. Simon joined Elecosoft following the departure in
August of David Pearson. Simon has held numerous senior financial
and other directorships in digital publishing, SaaS and business
services companies.
I also wish to thank Jason Ruddle, David Pearson and Jonathan
Edwards who left Elecosoft in 2017 for their contribution to the
success of Elecosoft during their time with us, and wish them well
in their new endeavours.
There have also been some changes among the Non-Executive
members of the Elecosoft Board.
Kevin Craig, joined the Elecosoft plc Board as a Non-Executive
Director in March 2017. He is founder and CEO of the highly
successful Political Lobbying and Media Relations Ltd (PLMR)
communications agency.
Serena Lang, having joined the Board of Elecosoft as a
Non-Executive Director in December 2014, was appointed
Non-Executive Deputy Chairman in May 2017. Serena's distinguished
and multifaceted career includes working as an Executive Consultant
at E&Y where she was heavily involved in client M&A and
integration activities, then onto BPs group leadership team where
she was VP Transformation in the downstream and latterly onto
Invensys Plc (now part of Schneider Electric) running the highly
profitable GBP130m North Europe and Africa Division of their
international software and process businesses as well as being the
VP in charge of the BP account globally.
Following the retirement of Jonathan Edwards at the end of his
term in office at the close of the financial year, David
Dannhauser, FCA was appointed as a Non-Executive Director and
Chairman of the Audit Committee in February 2018. David has been
CFO of several listed companies, including Elecosoft from 1994 to
2010, during which time he was closely involved in the
establishment and development of the Group's software
activities.
Proposed Dividend
In light of Elecosoft's strong trading performance and cash
generation, the Board has decided to recommend a final scrip
dividend of 0.40 pence per share, with an alternative cash dividend
of 0.40 pence per share, to give a total dividend for the year of
0.60 pence per share. This represents an increase of 50% relative
to the previous year (2016 total dividend: 0.40 pence per
share).
The scrip reference price is 49.6p, calculated from the average
of the closing price for an ordinary share of the company as
derived from the daily official list of the London Stock Exchange
during the period of five dealing days ending 23 March 2018.
Payment of the final dividend will be subject to approval by
shareholders at the Annual General Meeting and will be paid on 31
May 2018 to shareholders on the register at the close of business
on 6 April 2018; the ex-dividend date will be 5 April 2018.
Outlook
We see significant and growing opportunities for our software to
enhance the performance of businesses in construction and other
sectors, by improving the timeliness, cost-efficiency and risk
profiles of customers' projects. Thanks to the dedication and
skills of our talented colleagues, Elecosoft is increasingly seen
as a market-leading provider of construction software and training,
across all phases of a construction project and beyond, in the
on-going lifecycle of buildings with an excellent reputation for
developing and delivering market leading software to our
customers.
Although there is ongoing uncertainty in the market, notably in
relation to Brexit, only 32% of our turnover and 32% of our
operating profits were earned in the UK in the year. With the
majority of our profits earned in, and employees based in Sweden,
Germany, the Netherlands, Belgium and the United States, we remain
resilient to the effects of Brexit, and the fundamental drivers of
our business remain positive.
I am pleased to report that the Group has performed very well in
the first months of the current financial year. We remain open to
utilising our strong balance sheet for further bolt-on
acquisitions, as the successful execution and integration of Icon
provides a blueprint for future transactions.
I am confident that our unified branding, continued investment
in software development and increased integration of our product
portfolio will open up further exciting prospects to cross-sell our
products.
My colleagues and I therefore look forward with confidence to
the year ahead.
John Ketteley
Executive Chairman
26 March 2018
Financial Review
2017 has been another successful year as we have maintained the
trends in financial performance seen in 2016. Revenue and reported
operating profit grew by 12% and 48% respectively, driven by the
strong underlying performance of the group, the successful
integration of the Icon business and favourable movements in the
Group's core trading currencies. The Group remains in a strong
financial position, with a high and increasing proportion of
operating profits converted into cash resulting in the Group moving
into a net cash position by the end of the year.
Revenue
Revenue for the year increased 12% to GBP20.0m (2016: GBP17.8m).
Underlying revenue growth (excluding the impact of acquisitions and
movements in foreign exchange rates) was 4%, driven by growth in
new license sales and in revenue from maintenance and support
contracts of 2% and 8% respectively. The acquisition of Icon in
October 2016 contributed a further 4% to revenue growth, and the
impact of a weaker sterling against the Swedish Krona, the US
Dollar and the Euro adding a further 4% to revenue growth.
The overall revenue profile of the Group remains strong, with
the proportion of revenue derived from recurring maintenance and
support contracts increasing to 49% (2016: 48%). The level of
deferred income at the balance sheet date, which is a measure of
future maintenance revenue, increased by 9% to GBP4.8m (2016:
GBP4.4m).
Revenue growth was driven by direct sales up 13% to GBP18.8m
(2016: GBP16.7m) and growth through resellers up 8% to GBP1.2m
(2016: GBP1.1m), reflecting the Group's strategy to accelerate
revenue growth with partners.
The Group delivered solid underlying growth in its core mature
markets of the UK and Sweden, which together comprise 69% of total
revenue, of 3%. The Group's strategy to penetrate new geographic
markets was reflected in strong underlying revenue growth in the
USA, which grew 8% to GBP0.7m, in the Rest of Europe, which grew
25% to GBP2.2m and the Rest of World, which grew 23% to GBP0.4m
(all growth rates are at constant rates of exchange).
Profit
Gross profit is revenue less the direct cost of providing
products and services to customers, principally the costs of
training and consultancy staff. In 2017 the gross profit margin
increased by 1.2%pts to 87.9% reflecting cost control and revenue
mix.
Reported operating profit grew 48% to GBP2.4m (2016: GBP1.6m),
or 28% on an underlying basis (excluding the impact of acquisitions
and movements in foreign exchange rates). This was driven by the
strong revenue performance described above and reflects the benefit
of tight cost control across the Group. 2016 also included costs of
GBP0.3m in relation to the acquisition of Icon and the termination
of a former director. After excluding the impact of these costs,
together with the impact of the non-cash amortisation of acquired
intangible assets as set out below, adjusted operating profit for
the Group increased by 26%, or 18% on an underlying basis. The
overall adjusted operating margin improved by 1.5%pts to 13.9%
(2016: 12.4%).
Overheads included within adjusted operating profit increased by
3% on an underlying basis, reflecting tight cost management across
the Group and the receipt of GBP0.2m from the administrators of a
previously owned building company. Including the impact of
acquisitions and foreign currency effects, overheads increased by
12%.
2017 2016
GBP'000 GBP'000
----------------------- -------- --------
Operating profit 2,361 1,594
Acquisition expenses - 212
Former director
termination payments - 109
Amortisation of
acquired intangible
assets 412 292
------------------------ -------- --------
Adjusted operating
profit 2,773 2,207
======================== ======== ========
Software product development expenses amounted to GBP2.7m for
the year (2016: GBP2.6m) of which GBP1.1m (2016: GBP0.6m) was
capitalised, demonstrating the commitment to investing increasingly
in new product development and substantial product upgrades. The
spend capitalised in the year includes investments in Powerproject
BIM, Powerproject Vision, Powerproject v15 and other new products
scheduled to be launched in 2018. The carrying value of these
software assets together with the carrying value of software assets
capitalised in previous periods was reviewed for impairment at the
balance sheet date and an impairment charge of GBP0.2m (2016: nil)
was recorded in respect of two minor products.
Finance costs in the year, largely in respect of the Group's
term debt, totalled GBP0.1m (2016: GBP0.1m), resulting in a profit
before tax of GBP2.3m (2016: GBP1.5m).
The Group tax charge in the year was GBP0.4m (2016: GBP0.3m) and
represented 15.8% of profit before tax (2016: 17.4%). The decrease
in rate compared with 2016 reflected the reduced rate of
corporation tax in the United Kingdom which impacted both tax on
current year profits, as well as reducing the overall value of
deferred tax liabilities.
The net profit attributable to ordinary shareholders increased
by 53% to GBP1.9m (2016: GBP1.2m). The underlying increase,
excluding the impact of acquisitions and currency effects, was
25%.
After adjusting for the post-tax effect of non-operating items
and amortisation of acquired intangible assets, adjusted net profit
attributable to ordinary shareholders increased by 23% to GBP2.2m
(2016: GBP1.8m).
2017 2016
GBP'000 GBP'000
-------------------------- -------- --------
Net profit 1,897 1,243
Acquisition expenses - 212
Former director
termination payments - 87
Amortisation of acquired
intangible assets 291 234
---------------------------- -------- --------
Adjusted net profit 2,188 1,776
=========================== ======== ========
Cash flows
Cash generated from operations increased to GBP4.2m (2016:
GBP2.4m), the increase reflecting the strong trading performance of
the group and continued focus on management of working capital.
Overall working capital movements were favourable, contributing a
net cash inflow of GBP0.5m (2016: GBP0.1m).
Capital expenditure on intangible assets, principally comprising
the capitalisation of software product development costs, was
GBP1.2m (2016: 0.8m), reflecting the increased focus on the
development of new products and major product upgrades. Capital
expenditure on property, plant and equipment was GBP0.2m (2016:
GBP0.4m).
After deducting capital expenditure, adjusted operating
cashflow, as set out below, was GBP2.8m (2016: GBP1.5m), meaning
that 102% of adjusted operating profit (2016: 70%) was converted
into cash. This reflects the strength of the overall business model
where 49% of the group's revenue is recurring and typically
invoiced annually in advance, and the close focus on management of
working capital.
2017 2016
GBP'000 GBP'000
------------------------------- -------- --------
Cash generated in
operations 4,167 2,422
Purchase of intangible assets (1,154) (754)
Purchase of property, plant
and equipment (180) (449)
Acquisition expenses - 212
Former director termination
payments - 109
--------------------------------- -------- --------
Adjusted operating
cashflow 2,833 1,540
================================ ======== ========
Free cash flow before dividends and acquisitions, more than
doubled in the year to GBP2.6m (2016: GBP1.2m). Cash dividends paid
to shareholders amounted to GBP0.2m (2016: GBP0.1m).
2017 2016
GBP'000 GBP'000
-------------------------------------- -------- --------
Adjusted operating
cashflow 2,833 1,540
Net interest paid (98) (82)
Tax paid (251) (17)
Proceeds from disposals of property,
plant and equipment 161 100
Acquisition expenses - (212)
Former director termination
payments - (109)
---------------------------------------- -------- --------
Free cashflow 2,645 1,220
======================================= ======== ========
Funding and liquidity
The strong cash generation enabled the Group to end the year
with net cash of GBP1.0m (2016: net borrowings of GBP1.3m), as set
out in the table below.
2017 2016
GBP'000 GBP'000
----------------------------- -------- --------
Net debt at 1 January (1,304) (803)
Free cashflow 2,645 1,220
Dividends (197) (111)
Acquisitions - (1,700)
Inception of finance leases (169) (170)
Currency 56 260
------------------------------- -------- --------
Net cash / (debt)
at 31 December 1,031 (1,304)
============================== ======== ========
The Group's net cash position comprises cash at hand of GBP4.7m
(2016: GBP2.6m), offset in part by gross borrowings of GBP3.4m
(2016: GBP3.5m) and obligations under finance leases of GBP0.3m
(2016: GBP0.4m). Gross borrowings comprise a fully drawn overdraft
facility of GBP1.0m and term debt of GBP2.4m. The term debt is
repayable in quarterly instalments over the next three years, with
GBP0.8m repayable in 2018, GBP0.8m repayable in 2019 and GBP0.8m
repayable in 2020. Both the overdraft and term debt carry an
interest rate of 2.75% over the Bank of England base rate.
Security provided to the bank for the provision of these
facilities is a cross guarantee and debenture between the parent
company and certain UK subsidiary companies and a commitment of the
shares of the operating companies.
Covenants have been made to the bank in respect of three
elements: EBITA to gross financing costs, net borrowings to EBITDA
and cash flow to debt service. These covenants are tested
quarterly.
Earnings per share and dividends
Basic earnings per share increased 49% to 2.5p (2016: 1.7p).
After adjusting for the post-tax impact of non-operating items
and amortisation of acquired intangible assets, adjusted earnings
per share increased 20% to 2.9p per share (2016: 2.4p per
share).
The Board has recommended the payment of a final scrip dividend
in respect of the year ended 31 December 2017 of 0.40p per share
(2016 final dividend: 0.25p), with a cash alternative to be made
available. This gives total dividends in respect of the financial
year of 0.60p per share (2016: 0.40p), an increase of 50% over
2016.
Simon Morgan
Group Finance Director
26 March 2018
Consolidated Income Statement
For the year ended 31 December 2017
2017 2016
Notes GBP'000 GBP'000
--------------------------------------- ------ --------- ---------
Revenue 1,2 19,996 17,795
Cost of sales (2,421) (2,374)
Gross profit 17,575 15,421
Amortisation and impairment
of intangible assets (1,035) (631)
Acquisition expenses - (212)
Former directors termination payments - (109)
Other selling and administrative
expenses (14,179) (12,875)
----------------------------------------- ------ --------- ---------
Selling and administrative
expenses (15,214) (13,827)
----------------------------------------- ------ --------- ---------
Operating profit 2,3 2,361 1,594
Finance income 5 - 3
Finance cost 5 (107) (93)
Profit before tax 2,254 1,504
Tax 6 (357) (261)
------------------------------------------- ------ --------- ---------
Profit for the financial
period 1,897 1,243
========================================= ====== ========= =========
Attributable to:
Equity holders of the parent 1,897 1,243
----------------------------------------- ------ --------- ---------
Earnings per share (pence
per share)
----------------------------------------- ------ --------- ---------
Basic 8 2.5p 1.7p
Diluted 8 2.5p 1.6p
---------------------------------------- ------ --------- ---------
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2017
2017 2016
GBP'000 GBP'000
---------------------------------------------- -------- --------
Profit for
the period 1,897 1,243
Items that will be reclassified subsequently
to profit and loss:
Translation differences
on foreign operations 14 92
Other comprehensive income
net of tax 14 92
Total comprehensive income
for the period 1,911 1,335
================================================= ======== ========
Attributable
to:
Equity holders
of the parent 1,911 1,335
------------------------------------------------ -------- --------
Consolidated Statement of Changes in Equity
For the year 31 December 2017
Share Merger Translation Other Retained
capital reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ --------- --------- ------------ --------- ---------- --------
At 1 January 2016 749 - (172) (338) 7,654 7,893
Dividends - - - - (111) (111)
Share-based payments - - - 13 - 13
Elimination of
cancelled share-based
payments - - - (14) - (14)
Issue of share
capital 22 578 - - - 600
Transactions with
owners 22 578 - (1) (111) 488
------------------------ --------- --------- ------------ --------- ---------- --------
Profit for the
period - - - - 1,243 1,243
Other comprehensive
income:
Exchange differences
on translation
of net investments
in foreign operations - - 92 - - 92
Total comprehensive
income for the
period - - 92 - 1,243 1,335
------------------------ --------- --------- ------------ --------- ---------- --------
At 31 December
2016 771 578 (80) (339) 8,786 9,716
Dividends - - - - (197) (197)
Share-based payments - - - 56 - 56
Issue of share
capital 3 (3) - - - -
Transactions with
owners 3 (3) - 56 (197) (141)
------------------------ --------- --------- ------------ --------- ---------- --------
Profit for the
period - - - - 1,897 1,897
Exchange differences
on translation
of net investments
in foreign operations - - 14 - - 14
Other - - - - - -
Total comprehensive
income for the
period - - 14 - 1,897 1,911
------------------------ --------- --------- ------------ --------- ---------- --------
At 31 December
2017 774 575 (66) (283) 10,486 11,486
======================== ========= ========= ============ ========= ========== ========
Consolidated Balance Sheet
At 31 December 2017
2017 2016
GBP'000 GBP'000
------------------------------------- --------- ---------
Non-current
assets
Goodwill 11,480 11,469
Other intangible
assets 3,432 3,321
Property, plant
and equipment 833 868
Deferred tax
assets 219 -
Total non-current
assets 15,964 15,658
--------------------------------------- --------- ---------
Current assets
Inventories 16 11
Trade and other
receivables 3,738 3,674
Current tax
assets 37 67
Cash and cash equivalents 4,737 2,576
Total current
assets 8,528 6,328
-------------------------------------- --------- ---------
Total assets 24,492 21,986
-------------------------------------- --------- ---------
Current liabilities
Bank overdraft (1,012) (339)
Borrowings (790) (790)
Obligations under
finance leases (120) (163)
Trade and other
payables (1,496) (1,459)
Provisions (209) (228)
Current tax
liabilities (241) (89)
Accruals and deferred
income (6,592) (6,003)
Total current
liabilities (10,460) (9,071)
-------------------------------------- --------- ---------
Non-current
liabilities
Borrowings (1,580) (2,370)
Obligations under
finance leases (204) (218)
Deferred tax
liabilities (721) (570)
Non-current
provisions (41) (41)
Total non-current
liabilities (2,546) (3,199)
--------------------------------------- --------- ---------
Total liabilities (13,006) (12,270)
-------------------------------------- --------- ---------
Net assets 11,486 9,716
========================================== ========= =========
Equity
Share capital 774 771
Merger reserve 575 578
Translation
reserve (66) (80)
Other reserve (283) (339)
Retained earnings 10,486 8,786
Equity attributable to shareholders
of the parent 11,486 9,716
======================================== ========= =========
Consolidated Statement of Cash Flows
For the year ended 31 December 2017
2017 2016
GBP'000 GBP'000
---------------------------------------- -------- --------
Cash flows from operating
activities
Profit before
tax 2,254 1,504
Net finance
costs 107 90
Depreciation
charge 247 207
Amortisation and impairment
charge 1,035 631
Profit on sale of property,
plant and equipment (15) (28)
Share-based
payments charge 56 13
Decrease in
provisions (20) (75)
Cash generated in operations before
working capital movements 3,664 2,342
(Increase) / decrease in trade
and other receivables (65) 403
Increase in inventories
and work in progress (5) (1)
Increase / (decrease) in trade
and other payables 573 (322)
Cash generated
in operations 4,167 2,422
Interest
paid (98) (85)
Interest received - 3
Income tax paid (251) (17)
Net cash inflow from
operating activities 3,818 2,323
------------------------------------------ -------- --------
Investing activities
Purchase of
intangible assets (1,154) (754)
Purchase of property,
plant and equipment (180) (449)
Acquisition of subsidiary undertakings
net of cash acquired - (1,700)
Proceeds from sale of property,
plant, equipment and intangible
assets 161 100
Net cash outflow from
investing activities (1,173) (2,803)
------------------------------------------ -------- --------
Financing activities
Proceeds from
new bank loan - 3,160
Repayment of
bank loans (790) (1,722)
Repayments of obligations under
finance leases (226) (153)
Equity dividends
paid (197) (111)
Net cash (outflow)/inflow from
financing activities (1,213) 1,174
------------------------------------------- -------- --------
Net increase in cash
and cash equivalents 1,432 694
========================================== ======== ========
Cash and cash equivalents at beginning
of period 2,237 1,283
Effects of changes
in foreign exchange
rates 56 260
------------------------------------------ -------- --------
Cash and cash equivalents
at end of period 3,725 2,237
========================================== ======== ========
Cash and cash equivalents
comprise:
Cash and short-term
deposits 4,737 2,576
Bank overdrafts (1,012) (339)
----------------------------------------- -------- --------
3,725 2,237
======================================== ======== ========
Extract from Notes to the Consolidated Financial Statements
1. Revenue
Revenue disclosed in the income statement is analysed as
follows:
2017 2016
GBP'000 GBP'000
----------------------- -------- --------
Licence
sales 5,775 4,955
Recurring maintenance
and support revenue 9,856 8,622
Services
income 4,365 4,218
------------------------ -------- --------
Total revenue 19,996 17,795
======================== ======== ========
2. Segment information
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group
that are regularly reviewed by the chief operating decision
maker to allocate resources to the segments and to assess
their performance.
The chief operating decision maker has been identified as the
Executive Directors. The Group revenue is derived entirely from the
sale of software licences, software maintenance and support and
related services. Consequently, the Executive Directors review the
three revenue streams but as the costs are not recorded in the same
way the information is presented as one segment and as such the
information is presented in line with management information.
2017 2016
GBP'000 GBP'000
Revenue 19,996 17,795
-------------------------------------- -------- --------
Adjusted EBITDA 3,643 2,753
Amortisation and impairment
of purchased intangible assets (623) (339)
Depreciation (247) (207)
-------------------------------------- -------- --------
Adjusted operating profit 2,773 2,207
Amortisation of acquired intangible
assets (412) (292)
Acquisition expenses - (212)
Former directors'
termination payments - (109)
--------------------------------------
Operating profit 2,361 1,594
Net finance cost (107) (90)
Segment profit before
tax 2,254 1,504
Tax (357) (261)
--------------------------------------
Segment profit after
tax 1,897 1,243
====================================== ======== ========
Development project costs are expensed as incurred unless they
meet the accounting policy requirements for capitalisation. The
software projects that have been capitalised in the twelve months
to 31 December 2017 are explained in the Financial Review. Adjusted
EBITDA is earnings before interest, tax, depreciation and
amortisation, and adjusted to exclude acquisition expenses and
former director termination payments.
2017 2016
GBP'000 GBP'000
Group assets and
liabilities
Segment assets 24,492 21,986
Unallocated assets - -
Total Group assets 24,492 21,986
-------------------------- -------- --------
Segment liabilities 13,006 12,270
Unallocated liabilities - -
Total Group liabilities 13,006 12,270
-------------------------- -------- --------
2. Segment information continued
Geographical, Product and sales channel information
Revenue by geographical area represents continuing operations
revenue from external customers based upon the geographical
location of the customer.
Revenue by geographical destination is as follows:
2017 2016
GBP'000 GBP'000
--------------- -------- --------
UK 6,468 5,498
Scandinavia 7,239 6,745
Germany 3,066 2,982
USA 656 601
Rest of
Europe 2,178 1,653
Rest of
World 389 316
---------------- -------- --------
Total revenue 19,996 17,795
================ ======== ========
Revenue by product group represents continuing operations
revenue from external customers.
Revenue by product group is as follows:
2017 2016
GBP'000 GBP'000
-------------------- ------------ ------------
Project management 9,161 8,572
Site management 460 474
Estimating 2,973 2,964
Engineering 2,008 1,783
CAD/Design 2,352 2,180
Information
management 1,044 53
Visualisation 1,998 1,769
--------------------- ------------ ------------
Total revenue 19,996 17,795
===================== ============ ============
The Group utilises resellers to access certain markets. Revenue
by sales channel represents continuing operations revenue from
external customers.
Revenue by sales channel is as follows:
2017 2016
GBP'000 GBP'000
--------------- -------- --------
Direct 18,780 16,674
Reseller 1,216 1,121
------------------- -------- --------
Total revenue 19,996 17,795
=================== ======== ========
2. Segment information continued
Non-current assets excluding deferred tax by geographical area
represent the carrying amount of assets based in the geographical
area in which the assets are located.
Non-current assets by geographical location are as follows:
2017 2016
GBP'000 GBP'000
------------- -------- --------
UK 8,836 8,027
Scandinavia 5,893 6,145
Germany 1,156 1,396
USA 3 -
Rest of
Europe 76 88
Rest of
World - 2
-------------- -------- --------
Total 15,964 15,658
================== ======== ========
Information about major customers
Revenues arising from sales to the Group's largest customer were
below the reporting threshold of 10% of Group revenue (2016: Below
10% reporting threshold).
3. Operating profit
The continuing operations operating profit for the period is
stated after charging/(crediting) the following items.
2017 2016
GBP'000 GBP'000
-------------------------------------- -------- --------
Software product development 1,694 1,968
Depreciation of property,
plant and equipment 247 207
Amortisation of acquired
intangible assets 412 292
Amortisation of other intangible
assets 401 339
Impairment of other intangible 222 -
assets
Receipt from administrators (166) -
of former group company
Profit on disposal of property,
plant and equipment (15) (28)
Foreign exchange (gains)/losses 55 (73)
Fees payable to the Company's
auditor for the audit of
the parent company and consolidated
financial statements 33 38
Fees payable to the Company's
auditor and its associates
for other services:
- The audit of the Company's
subsidiaries 49 54
- Other services 8 2
Operating lease rentals:
Plant, equipment and vehicles 56 42
Properties 440 394
--------------------------------------- -------- --------
4. Employee information
The average number of employees during the period, including
Directors, in continuing operations was made up as follows:
2017 2016
number number
---------------------- ------- -------
Sales &
marketing 55 54
Client services 59 56
Software development 50 46
Management and
administration 37 34
------------------------ ------- -------
201 190
====================== ======= =======
Staff costs during the period, including Directors amounted
to:
2017 2016
GBP'000 GBP'000
-------------------------- -------- --------
Wages and
salaries 8,977 8,194
Social security 1,833 1,680
Pension
costs 582 566
Share-based payments 56 13
11,448 10,453
Less: Development
staff costs capitalised (1,052) (625)
-----------------------------
10,396 9,828
========================== ======== ========
Pension costs relate to contributions to defined contribution
pension schemes. Development staff costs are charged to projects
and capitalised if those projects meet the criteria for
capitalisation.
The remuneration of the Directors, who are the key management
personnel of the Group, is set out below:
2017 2016
GBP'000 GBP'000
---------------------- -------- --------
Short-term employee
benefits 797 576
Post-employment
benefits 49 23
Termination
benefits - 100
Share based payments 46 13
Executive
Directors 892 712
Fees - non-executive
Directors 140 82
------------------------ --------
1,032 794
====================== ======== ========
The emoluments of the highest paid Director were GBP291,000
(2016: GBP280,000).
The remuneration of the non-executive Directors is determined by
the Board. The non-executive Directors do not have service
contracts but are appointed for an initial term of three years,
which may thereafter be renewed from year to year. They do not
participate in any of the Group's share-based incentive or pension
schemes.
5. Net finance income/(cost)
2017 2016
GBP'000 GBP'000
----------------------------------- -------- --------
Finance income:
Bank and other interest
receivable - 3
Finance costs:
Bank overdraft
and loan interest (101) (84)
Finance leases and hire purchase
contracts (6) (9)
--------------------------------------- -------- --------
Total net
finance cost (107) (90)
==================================== ======== ========
6. Taxation
(a) Tax on profit on ordinary activities
The tax charge in the income statement from continuing
operations is as follows:
2017 2016
GBP'000 GBP'000
---------------------------- -------- --------
Current
tax:
UK corporation tax
on profits of the
year 122 34
Tax adjustments in respect
of previous years 72 -
194 34
Foreign
tax 231 145
Total current
tax 425 179
----------------------------- -------- --------
Deferred
tax:
Origination and reversal
of temporary differences (55) 87
Tax adjustments in respect
of previous years (13) (5)
Total deferred
tax (68) 82
----------------------------- -------- --------
Tax charge in the
income statement 357 261
=============================== ======== ========
Income tax for the UK has been calculated at the weighted
average rate of UK corporation tax of 19.25% (2016: 20.0%) on the
estimated assessable profit for the period. Taxation for foreign
companies is calculated at the rates prevailing in the relevant
jurisdictions.
(b) Reconciliation of continuing operations tax charge
The tax assessed on continuing operations accounting profit
before income tax for the year is the same as the standard rate of
UK corporation tax of 19.25% (2016: 20.0%) for the period under
review. The reconciliation is explained below:
2017 2016
GBP'000 GBP'000
Profit on continuing
operations before tax 2,254 1,504
------------------------------------------- -------- --------
Tax calculated at the average standard
rate of UK corporation tax of 19.25%
(2016: 20.0%) applied to profits
before tax 434 301
Effects
of:
Expenses not deductible
for tax purposes 32 90
Research & development
tax relief (36) (54)
Deferred tax not
recognised (16) (15)
Prior year adjustments (23) (5)
Utilisation
of losses (60) (80)
Tax rate differences
in foreign jurisdictions 26 16
Other differences - 8
----------------------------------------- -------- --------
Continuing operations tax
charge for the year 357 261
============================================ ======== ========
6. Taxation continued
(c) Unrecognised tax losses
The Group has tax losses of GBP1,673,000 (2016: GBP1,764,000)
arising in the UK. The potential deferred tax asset not recognised
in respect of losses in UK subsidiaries is GBP293,000 (2016:
GBP347,000). No deferred tax is recognised on the unremitted
earnings of overseas subsidiaries.
7. Dividends
Dividends paid during the year comprised a final 2016 dividend
of 0.25p per ordinary share (2016: nil) and a 2017 interim dividend
of 0.20p per ordinary share (2016: 0.15p).
Shareholders were offered an opportunity to receive the 2016
final dividend in the form of new shares in lieu of the proposed
final dividend. The 2017 interim dividend was declared as a scrip
dividend, with shareholders having the option to receive an
alternative cash dividend of the same value.
Cash dividends of GBP197,000 (2016: GBP111,000) were paid during
the year as follows.
2017 2016 2017 2016
pence pence
Ordinary per per
shares share share GBP'000 GBP'000
--------------------------- ------- ------- -------- --------
Declared and paid during
the year
Interim - current
year 0.20 0.15 64 111
Final - previous
year 0.25 - 133 -
---------------------------- ------- ------- -------- --------
Total 0.45 0.15 197 111
============================= ======= ======= ======== ========
Scrip dividends were issued in the year as follows.
Value of
shares issued
Shares issued (GBP'000)
---------------- -----------------
Ordinary
shares 2017 2016 2017 2016
--------------------------- --------- ----- -------- -------
Declared and paid during
the year
Interim - current year 204,629 - 89 -
Final - previous year 146,721 - 57 -
----------------------------- --------- ----- -------- -------
351,350 - 146 -
========================== ========= ===== ======== =======
The directors have recommended a final scrip dividend of 0.40p
per share, with an alternative cash dividend of 0.40 pence per
share, to give a total dividend for the year of 0.60 pence per
share. The scrip reference price is 49.6p, calculated from the
average of the closing price for an ordinary share of the company
as derived from the daily official list of the London Stock
Exchange during the period of five dealing days ending 23 March
2018.
If the 2017 final dividend is approved at the Annual General
Meeting in May 2018 the dividend will be paid on 31 May 2018 to
shareholders on the register at the close of business on 6 April
2018 (ex-div date 5 April 2018). In accordance with IFRS, the
dividend is not provided for as a liability in the accounts until
it becomes a legal liability of the Company and therefore will be
recorded in the interim and annual accounts for 2018.
8. Basic and diluted earnings per share
2017 2016
---------------------------------------- ----------------------------------------
Weighted Weighted
Net profit average Net profit average
attributable number attributable number
to shareholders of shares EPS to shareholders of shares EPS
GBP'000 (millions) (pence) GBP'000 (millions) (pence)
------------------ ----------------- ----------- -------- ----------------- ----------- --------
Basic earnings
per share 1,907 76.3 2.5 1,243 74.4 1.7
Diluted earnings
per share 1,907 76.7 2.5 1,243 75.5 1.6
================== ================= =========== ======== ================= =========== ========
Shares held by the Employee Share Ownership Trust are excluded
from the weighted average number of shares in the period.
Notes
1. The financial information in this announcement, which is
audited, does not constitute statutory accounts within the meaning
of section 435 of the Companies Act 2006. Statutory accounts of the
Company, on which the Auditors will report, will be delivered to
the Registrar of Companies. The comparative figures for the 12
months to 31 December 2016 have been taken from, but do not
constitute, the Company's statutory financial statements for that
financial year.
2. The Group's activities, together with the factors likely to
affect its future development, performance and position are set out
in the Operating Review and Financial Review.
3. The Group's clients include many top contractors in the
building and construction sector in the UK, Sweden, Germany,
Benelux and the United States with no significant client
concentration. The software products and services provided by the
Group are reasonably embedded in their client's core operations and
49% (2016: 48%) of the Group's revenue is from recurring revenue
contracts.
These maintenance contracts are renewed throughout the year
although there is a slightly greater weighting in the fourth
quarter. For these reasons, the Group has good visibility on any
potential deterioration in its trading outlook and potential risk
to the business. Not-withstanding the Group has net current
liabilities of GBP1,932,000 at 31 December 2017 (2016:
GBP2,743,000) these amounts are after deferred income of
GBP4,789,000 (2016: GBP4,401,000) relating to annual maintenance
contracts which are non-refundable. Historically, there is a low
level of maintenance cancellations each year and the Board closely
monitors clients that are potentially at risk of cancellation as
well as the pipeline of new business.
The Group has both cash and undrawn credit facilities available
to support its business operations and therefore the Board believes
that the Group is well-positioned to manage the business risks.
Revenue, operating profit and cash flow budgets have been prepared
at business unit level. After making appropriate enquiries, the
Directors have a reasonable expectation that the Group has adequate
resources to continue in operation for the foreseeable future.
Accordingly, the Group continues to adopt the going concern basis
in preparing its consolidated financial statements
4. The information herein has been prepared on the basis of the
accounting policies adopted for the year ended 31 December 2017,
set out in the Company's Annual Report and Accounts and as
previously disclosed in the Company's Annual Report and Accounts
for the year ended 31 December 2016.
5. The Annual General Meeting of Elecosoft plc will be held
Brewers' Hall, Aldermanbury Square, London EC2V 7HR on 17th May
2018 at 12 noon.
6. The Annual Report and Accounts for the year ended 31 December
2017 will be sent to shareholders by 23 April 2018 and will be
available to view on the Company's website, www.elecosoft.com, from
that date.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FKADKKBKBQNB
(END) Dow Jones Newswires
March 27, 2018 02:01 ET (06:01 GMT)
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